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May 11, 2020

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Integrator warns of worrying shift from ‘value’ to ‘cost’ in procurement process

Integrated Fire and Security systems business, Evolution, has warned the industry that there is a worrying shift in procurement focus from ‘value’ to ‘cost’.

Value-Evolution-20The business added that it believes integrators will now need to work even harder with their manufacturing partners and distributors to demonstrate the real value solutions can deliver for clients.

Brendan McGarrity, Head of Risk & Design at Evolution, says that not everything in a systems business can be commoditised: “Individual components within a total system represent only a small part of the total cost,” he explains, “and procurement needs to take into account the whole cost of the system and, more importantly, the value it delivers and the operational benefits it brings.

“Procurement departments need, also, to consider the total cost of ownership, and not a single, transactional ‘price’. A camera is not just a camera; a camera can be a critical element of a wider system whose ‘value’, therefore, is more important than its unit price. ‘Cheaper’ cameras can always be found, but the true cost of doing so is not always understood.”

Until relatively recently, there was an ordered world in the purchase and supply of security equipment, and established channels. But as the industry has matured, those ‘traditional’ manufacturer/distributor models have been changing, especially at the high end, believes Evolution. Value Added Distributors are being steadily squeezed out, manufacturers more inclined to sell direct, and the end-user is becoming better informed both in terms of the technology available, and in the way such technology is procured. This often results in a higher volume, lower margin distribution model as often seen in the IT computer industry.

While it is nothing new for a serious integrator to work directly with a manufacturer, neither is it new for a distributor to have their margins squeezed, Brendan thinks it’s unhelpful and unfair to relegate distributors to be nothing more or less than a shifter of boxes: “Distributors still have a vital role to play in the security supply chain,” he says, “especially when the product is manufactured overseas, and long may this continue.

“Clients are driving change and that has to be a good thing,” he continues, “and the supply chain of the future will look very different than the supply chain of today. What we need to be careful of, however, are those who know the cost of everything and the value of nothing.”

 

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